Bloomberg News

Kingfisher Air Plans Revival With Parent UB Group’s Funds

By Karthikeyan Sundaram
January 10, 2013

Kingfisher Airlines Ltd. (KAIR), the Indian
carrier that stopped flying in October because of a cash crunch,
plans to restart services with funds from parent UB Group,
according to an e-mail Chairman Vijay Mallya sent to employees.

The airline will resume flights this year with seven
aircraft, before increasing its fleet to 21 within four months,
Mallya, who controls the UB Group, said in the e-mailed letter
today. UB Group, which includes India’s biggest liquor maker,
and associates have committed 6.5 billion rupees ($119 million)
to fund the carrier’s revival plan, he said in the letter.

Kingfisher, the only Indian carrier to order Airbus SAS
superjumbos, has been seeking cash for more than two years and
was in talks with possible investors such as Etihad Airways PJSC
for its revival. The airline lost its operating license on Jan.
1 after failing to convince authorities it has enough cash to
restart operations.

“The plan shows that despite being in a helpless
situation, Mallya is trying to make an effort,” said Harsh
Vardhan, chairman of Starair Consulting, a New Delhi-based
company that advises airlines. “The founder’s determination
plays a very important and definite role in any revival.”

Mallya didn’t respond to two calls made to his mobile
phone.

Shares Jump

Kingfisher jumped 9.7 percent at close of Mumbai trading,
its first advance in six days. The benchmark BSE India Sensitive
Index was little changed. The stock fell 29 percent last year,
after slumping 68 percent in 2011.

Kingfisher’s founders have contributed 11.5 billion rupees
to the company since April 1, Mallya, who has given personal
guarantees worth 59 billion rupees for the carrier’s loans, said
in September. In November, the liquor tycoon agreed to sell a
stake in United Spirits Ltd. (UNSP) to London-based Diageo Plc. (DGE)

India’s aviation regulator suspended Kingfisher’s permit in
October following flight disruptions caused by strikes triggered
by unpaid wages. Employees later agreed to resume work after
management pledged to pay salaries.

The carrier, which was No. 2 in India by market share in
2011, has piled up a debt of 85 billion rupees. It also
defaulted on payments to fuel suppliers, creditors and airports
as its losses widened amid rising fuel costs and a price war.

The Bangalore, India-based carrier has two years to seek
the renewal of its license, according to the letter. The Mint
newspaper reported Mallya’s letter on its website earlier today.

To contact the reporter on this story:
Karthikeyan Sundaram in New Delhi at
kmeenakshisu@bloomberg.net

To contact the editor responsible for this story:
Anand Krishnamoorthy at
anandk@bloomberg.net